Tailor made.

A contributing writer to Contemporary Long Term Care, Jim Moore is president of Moore Diversified Services, a Fort Worth-based senior housing and health care consulting firm, and author of Assisted Living 2000.

The time is right to customize your community

YOU CAN HAVE ANY COLOR AUTOMOBILE YOU WANT--AS LONG as it's black. That quote was attributed to Henry Ford, who once held a monopoly on affordable, mass-produced automobiles. But just as Ford had to change his market positioning for the model T, we must respond to shifting consumer preferences for senior housing.

Your real Y2K problem may be not your computers but your product and service strategy. As you plan for the future, ask yourself: "Are we truly responsive to consumer needs and wants, or are we just copying what appears to be successful?"

Major hotel chains and automobile manufacturers have multiple product lines, each aimed at a specific (though sizeable) market sector. Senior living developers need to adopt that strategy, which is known as mass customization.

In the early stages of a product's life cycle, almost anything sells. During the last stages, innovation is hard to implement and frequently unsuccessful. The best time for innovation is when the product is still growing fast and achieving relatively high market penetration-the stage where assisted and independent living and CCRCs are right now (see chart at right). Competition is intense, market visibility is high, and mass customization can help an owner or sponsor win competitive turf battles.

How can you keep your community from being perceived as a look-alike, mass-market commodity? By offering attractive prices, high-quality services, and/or an appealing quality of life. Here are some initiatives that could be implemented by astute owners in the next two to three years. These strategies are not trouble-free, but working out the bugs may be worth the effort.

* Develop more affordable living options, especially in smaller markets. One way to lower the price you charge consumers (and thus greatly expand your market) is to spread fixed and semi-variable operating costs across more revenue-producing units. In small markets, this may mean integrating assisted living with existing nursing operations, or offering a combination of assisted and independent units.

* Find ways to truly improve the quality of life every day for every resident in areas such as individualized recognition, intellectual stimulation, and self-expression.

* Deliver services beyond your campus. Where is it written that all revenue-producing units must be on your campus? Just as hospitals offer significant outpatient services, you could serve seniors who don't live on your campus. You might bring people in for respite care, take rehab in-house and serve outpatients as well as your residents, or offer adult day services.

* Re-engineer home health care. The recent changes in Medicare reimbursement have dealt a heavy blow to this popular service, but home health agencies' loss could be your gain. By offering a blend between defined services covered by Medicare and innovative private-pay services, you might be able not only to allocate some overhead to another cost center but also to bring in some incremental profits.

* Rethink your staffing models. Direct resident care staffing needs are relatively inflexible, but you can probably spread indirect costs (administration, business office, etc.) across more revenue-producing operations.

* Regionalize for operational efficiency. This allows you to spread fixed costs such as marketing and operational support systems across more than one community.

* Put liquidated home equity to work. This can be accomplished by offering your residents prudent spend-down options (for details, see the June Assisted Living column).

Public companies will probably start developing such options soon, if they haven't already. Their current markets have served them well during the first stage of their product life cycle, but they must continue to deliver double-digit compounded annual earnings per share in order to satisfy investors. To do this, many will have to expand into different markets--and that will mean developing different products.

This could present opportunities for operators of small communities as well. Local operators may be quicker to see and build on a community's needs, using mass customization strategies to seize the competitive advantage. And public companies looking to grow through acquisition will provide some smaller operators with excellent exit opportunities.

But whatever your company's size, you cannot rely solely on past successes to develop a realistic vision of the future. As we enter a new phase in our product's life cycle, the margin for error is narrowing.